INFS1000: Digital Business Innovation

Session 3: Competitive Advantage

Before we start...
Some admin matters...
Lab workshops
- Lab workshops start THIS WEEK. See information on Blackboard and download
the files from the Learning Resources section.

Group project
- Assignment text have been uploaded to the Assessment section on BlackBoard;
we will explain more during TBL session next week.

No stream or group changes

- You need to attend this stream for the rest of the semester and work in your
assigned group; even if your stream might be changed in your timetable, you
need to stay here, unless there is an actual time clash between your INFS1000
stream and another UoS!

Group conflict
- In case of any (serious) group conflict, please let your tutor or stream lecturer
know of the issue as early at possible

Before we start...
Some organisational matters...
Discussion Board in Blackboard
- To discuss issues concerning content or administrative matters, you can use the
Discussion Board. While I will attend to your questions, students are also
encouraged to answer...!

Academic Honesty
- Do it ASAP! (only if you havent already done it in earlier semesters or other
Units)

INFS1000 Course layout

Main concepts

Lab classes

IS Introduction

Five components of IS, IT vs. IS, business first

No lab classes

29 Feb

Business Processes

BP definitions & components, Role of BPs for

business, Role of info, process automation

No lab classes

07 Mar

Competitive Advantage

Structure of a business (functional vs. process

view), value chain, industry structures, strategy

Strategy & Competitive

Advantage

14 Mar

Databases & Information

Database definition & role, tables & relationships,

Forms, Reports, Queries, ERD introduction

Data Modelling (ERD)

21 Mar

Data Modeling (ERD)

practice ER modeling (Chens Notation)

Data Modeling (ERD)

04 Apr

BIS Ethical Issues

4 Dimensions of Info. Ethics, Ethical dilemmas,

judging dilemmas, making decisions

Data Modeling (ERD)

11 Apr

Business Process Mgmt

Role of BPM, Scope, BPMN, Process

change/innovation, cross-functional systems

Process Modeling (BPMN)

18 Apr

ANZAC Day

Public Holiday: No TBL Session for this week

Project Consultation

Process Modeling (BPMN)

practice process modeling (BPMN)

Process Modeling (BPMN

1
0

Digital Commerce

E-Commerce, challenges & benefits of selling

online, Web 2.0, Mashups, Digital Assets

Database Design

1
1

Business Intelligence

BI model, business data architecture, DW vs.

transactional databases, Role of BI for business

Database Design

1
2

Social Media & Collab.

CE 2/4

Platforms for team collaboration, Enterprise 2.0,

Knowledge Sharing, Content Management

Database Design

1
3

Wrap up & Exam prep

Repetition, Exam overview

Lab Demonstration

Business
innovation

Business
transformation

IS and the
organisation

Ch

Data &
information

Topic

INFS1000: Digital Business Innovation

CE 7

<EXAM>

25 Apr

02 May
09 May
16 May
23 May

30 May

Learning objectives: At the end of this workshop

you will understand:

Whattheroleofstrategyinbusinessis.
Howtodetermineacompanyscompetitivepositionina
marketplace.
Howtodetermineacompetitivestrategy.
Whatavaluechainis.
HowISenablecompaniestoachievecompetitiveadvantage
throughthedesignofbusinessprocesses
Readingguide:
- Textbookchapter3

INFS1000: Digital Business Innovation

Agenda for today

1. Repetition W2: Business processes

2. Activity: Multiple choice exercise
3. Competitive advantage and strategy
4. Activity: Analyse market structures

INFS1000: Digital Business Innovation

Q2: What Is a Business Process?

ABusinessProcess(BP)isastructurednetworkof
activities supportedbyresources, facilities,and
information thatinteracttoachievesomebusiness
function.
- BPs turninputintohighervalueoutput.
- Abusinessprocessisasystem;sometimesbusiness
processesarereferredtoasbusinesssystems
INFS1000: Digital Business Innovation

Characteristics of well-designed
Business Processes
Complete
- WelldesignedBPsincludeallactivitiesnecessarytoachievethebusinessgoal.

Minimal
- WelldesignedBPsdonotincludeunnecessaryactivities(costefficiency).

Wellstructured
- ActivitiesinawelldesignedBParestructuredinalogicalsequence

Embedded
- WelldesignedBPsconnectandinteractwithotherBPsintheorganisationin
effectiveandefficientways.

Outcomeofawelldesignedbusinessprocessis:
- increasedeffectiveness(valueforthecustomer)
- increasedefficiency(lesscostforthecompany)
INFS1000: Digital Business Innovation

Agenda for today

1. Repetition W2: Business processes

2. Activity: Multiple choice exercise
3. Competitive advantage and strategy
4. Activity: Analyse market structures

INFS1000: Digital Business Innovation

Activity W3(1): Multiple Choice practice

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Agenda for today

1. Repetition W2: Business processes

2. Activity: Multiple choice exercise
3. Competitive advantage and strategy
4. Activity: Analyse market structures

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Q1: How does Competitive Strategy affect IS?

IS help organisations achieve business objectives. But

where do objectives come from?

1. Organisations examine industry structure to understand

opportunities and risks
2. Devise a competitive strategy to leverage opportunities
and respond to risks
3. Design organisational structures and processes to
implement strategy
4. Design (or buy) and implement IS (features,
applications) to execute processes

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Competitive Strategy determines IS (Business first)

1. By Analysing market structures, nature of competition, companys strategic position
2. By formulating the right competitive strategy for the company
How can we
understand
the industry?

How do we
we respond?

How do we
implement?

3. By creating suitable internal structures

How do we
execute?

How can this

be facilitated
through IS?

4. By designing efficient business processes

5. By designing and implementing IS
Kroenke, Bunker, Wilson: Experiencing MIS 2010 Pearson Australia
INFS1000: Digital Business Innovation

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Q2: Which Five Forces Determine Industry

Structure?
Portersfivecompetitiveforces:
- Bargainingpowerofcustomers
- Bargainingpowerofsuppliers
- Threatofnewentrants
- Rivalryamongexistingfirms
- Threatofsubstitutes

Ok,whatisasubstitute?
- Asubstituteprovidessameorsimilarutilityforcustomer,butwithdifferenttechnology
- Somesubstituteshavethepotentialtochangemarkets
- AcompetitorsproductisNOTasubstitute!
- Thisisa<Product>,whichisatypeof<ProductType>
- Same<ProductType>butdifferent<Product>=substitute
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Porters Five Forces Model

Bargaining Power of Suppliers:
These factors tend to increase supplier power:
Dominated by a few suppliers
Suppliers more concentrated than buyers
No substitutes
Supplier input to quality of products critical

Suppliers

New
Entrants

Rivalry among
Industry
Competitors

Buyers
Bargaining Power of Buyers:
These factors tend to increase buyer power:
Concentrated
Low switching costs (standardized products or
services)
Buyer has all relevant information

Rivalry among competitors:

Depends on:
Number of rivals
Level of differentiation
Height of customer exit barriers

Substitutes

INFS1000: Digital Business Innovation

Threat of new entrants:

Depends on: Entry barriers.
Typical barriers are:
Capital requirements
Economies of scale
Customer switching costs
Expert knowledge
Government policies
Access to suppliers and distributers

Threat of substitutes:
Depends on:
Availability of similar products
Customer switching costs
Aggressiveness of Producers
15

Examples of Porters Five Competitive

Forces

2
1

5
3

Copyright 2014 Pearson Australia (a division of

Pearson Australia Group Pty Ltd)
9781442561779/Kroenke/Experiencing MIS/3e

16

Q3: How Does Analysis of Industry Structure

Determine Competitive Strategy?
Porteridentifiedfourcompetitivestrategies:
- CostLeader
1.

Broad costleadershipacrossindustry(mostefficient)

2.

Narrow costleadershipfocusedonparticularindustrysegment(most
efficient)

- Differentiation
3.

Broad differentiationacrossindustry(mosteffective)

4.

Narrow differentiationfocusedonparticularindustrysegment(most
effective)

Whichcompetitivestrategyisdepictedinthefollowingvideo?
- https://www.youtube.com/watch?v=lBUJcD6Ws6s
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Porters Four Competitive Strategies

Example: Car manufacturers
Kia, Hyundai

Toyota,
Volkswagen

Daihatsu,
Great Wall

Mini, Ferrari

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Q4: How Does Competitive Strategy Determine

Value Chain Structure?
Businessesneedtoorganiseinternallytocreateanddeliver
productsandservices.
Avaluechainis:
- Anetworkofvaluecreatingactivitiesthatconsistof:
- Primaryactivities:addvaluedirectlytocustomers
- Supportactivities:assistprimaryactivities

Thisisagenericmodelthatmainlyfitsmanufacturingorganisations

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Porters Value Chain Model

Primary Activities

Support Activities
The generic, top-level business process of a manufacturing-focused business!
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Activities in Value Chain

Eachprimaryactivityclearlyaddsvaluetotheproduct
Threesupportactivities
-

Humanresources
-

Accountingandinfrastructure
-

generalmanagement,finance,accounting,legal

ProcurementandTechnology
-

training,recruiting,compensation

findingvendors,negotiatingprices
R&D,newtechniques,methodsandprocedures

Thesecontributetoproduction,sales,andservice
Theyindirectlycontributetovaluecreationforthecustomer

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Q5: How do Value Chains relate to Business

Processes and Information Systems?
Businessprocesses:
- Describehowtoexecutevaluecreation(work)withinoracrosspartsof
thevaluechain
- Linktogetherdifferentpartsofthevaluecreation(e.g.,integrated
manufacturingplanning) crossfunctionalprocesses

AnISmaythenbedesignedtosupportthebusinessprocess.

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EXAMPLE: High-Value Bike Rental

Bikerentalcompanyusesacomputersystemtomaintaincustomerdatainthe
customerdatabaseandbikedatainabikeinventorydatabase.

Twostrategicoptions: coststrategyordifferentiation (value)strategy

1.Reducingcosts:Eliminaterentalpersonnel.

Bicyclescouldbeplacedonrackswithlocksthatcustomerscanopenwithhotel
roomkeys;

Thebikewouldberenteduntilcustomerplacesthebikebackontherack

2.Increasevalueoftheprocess:

Therentalagencycoulddecidetorentadditionaltypesofequipmentortosell
clothingorfoodandbeverages.

Personalisedservicesincreasevalueandexperienceforcustomers.

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INFS1000: Digital Business Innovation

Kroenke, Bunker, Wilson: Experiencing MIS 2010 Pearson Australia

Different BPs

Two different
strategies

Same
activities

Bicycle Rental Competitive Strategies

24

Q6: How Do Information Systems Provide

Competitive Advantage?

Copyright 2014 Pearson Australia (a division of

Pearson Australia Group Pty Ltd)
9781442561779/Kroenke/Experiencing MIS/3e

25

Competitive Advantage via

Business Process Design
1. Lockincustomers
-

Bycreatinghighswitchingcosts

E.g.automatedorderingprocess

2. Lockinsuppliers
-

Makeiteasytoconnecttoandworkwithyourorganisation

E.g.crossorganisationaljustintimedeliveryprocess

3. Createentrybarriers
-

Makeitdifficult(expensive)fornewcompetitorstoenteramarket

E.g.Ecomoniesofscalethroughprocessoptimisation

4. Establishallianceswithcompetitors
-

Standardiseprocesses,sharecosts,developjointprocesses

E.g.Airlinealliances,suchasStarAlliance,OneWorld

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Agenda for today

1. Repetition W2: Business processes

2. Activity: Multiple choice exercise
3. Competitive advantage and strategy
4. Activity: Analyse market structures

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Activity W3(2): Strategic Analysis

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The key take-aways for today

PortersFiveForcesModel
4GenericStrategies
ValueChainModel
- Differencebetweenvaluechain,primaryactivitiesandbusiness
processes
Linkbetweenstrategyandbusinessprocessdesign
Competitiveadvantagethroughbusinessprocessdesign
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Homework activity W3(3):

Strategic analysis of $RU case

Thisisaungraded assignment

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